About the author

Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan's Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for American.com and the AEIdeas blog.

Another question for proponents of a higher minimum wage

I have a question for anyone who believes that a nearly 25-percent hike in the minimum wage (from $7.25 to $9 per hour) will not harm low-paid workers. Suppose the government were to mandate, not an hourly minimum wage, but, instead, an hourly minimum break time. Specifically, suppose Uncle Sam were to oblige employers to force each worker earning less than $9.00 per hour to take at least 15 minutes of break time each and every hour. Is it plausible that employers would continue to pay their low-wage workers for 45 minutes of work per hour the same wage that these employers paid for 60 minutes of work per hour?

Does anyone seriously doubt that employers would respond to this mandate by reducing these workers’ hourly pay, by replacing many of these workers with machines, by working these employees 33 percent harder or faster, or by otherwise adjusting to the higher costs imposed by a mandated minimum break time in ways that reduce the employment options and benefits available to low-paid workers?

Assuming that everyone of sense sees that a mandated minimum break time would prompt employers of low-skilled workers to adjust in ways detrimental to those workers, why do so many people of sense deny the reality that a mandated minimum wage – which is nearly the same beast as a mandated minimum break time – prompts the very same sort of adjustments by employers?

MP: In a previous CD post, I outlined some of the ways that a higher government-mandated minimum wage would be detrimental to low-skilled workers.

In another post at Cafe Hayek, Don points to economist Dwight Lee’s editorial yesterday in the WSJ (“A Higher Minimum Wage – but Not for Interns in Congress“) that (in Don’s words) “highlights the hypocrisy of politicians who, in one breath, boast of the great benefits that their offices’ unpaid internships offer to young men and women, and who then, in their next breath, pontificate self-righteously about how their support for a higher legislated minimum-wage is evidence of their special concern and care for low-skilled workers,” here’s an excerpt:

The president and other champions of a higher minimum wage clearly recognize the value of entry-level work. Washington interns do much of the phone-answering and mail-processing chores that await first-time jobholders in offices across the land. An entry-level job is much more important for many young people than making a little summer money. It is the best opportunity they have for getting the training to develop skills they need to earn a good income later in life when they will have more financial obligations.

Increasing the minimum wage would make this path to a better financial future harder than it needs to be for the young people who already face the most difficulty. These are the young who don’t have the advantages of a stable family life, parental role models at home, and teachers in good private or public schools instilling in them the joy of learning.

Discussion: (37 comments)

but I do volunteer at several things and none of them require minimum wage and on top of that – it’s not “trainee” work.. it requires some level of expertise – but not the minimum wage… and one of those jobs is for a a govt entity.

It seems that both employees and interns have the options to accept a position for an agreed rate of pay, remain at the job for as long as it’s available and remains mutually beneficial to both worker and employer, and to leave when it no longer meets their needs or they find something better.

The real issue is what role intrusive government busybodies should have in voluntary, mutually beneficial agreements between consenting parties.

“In theory what would keep someone from volunteering at any job – even like McD’s?”

If the employer is a for-profit business, which McDs is, you must be paid for any work you do that benefits the employer.

“would that be illegal?</i."

Yes, unless you provide absolutely no value to McDs.

"how would that be different from an “unpaid internship”?”

An internship is only unpaid in dollars. The intern is paid in valuable skills and experience which will benefit them later in a paid job.

“I would imagine that being an unpaid intern in Congress would be worth a great deal on a resume, eh?”

Yes indeed.

“Peace Corps, Red Cross, Americorps, and quite a few others attract people willing to work for peanuts.”

It is quite obvious that working as an intern pays a great deal, just not in dollars. Likewise, working as an unpaid or peanut paid volunteer for a government official or non-profit organization provides great benefits and rewards for those who participate.

The hypocrisy is that while politicians understand the value to those serving as unpaid interns, and extol their own virtuosity for providing such opportunities, they loudly whine that private, for profit businesses that provide the same mutually beneficial opportunities are exploiting interns.

But then, they ARE politicians, so what would we expect?

If a s5tudent or inexperienced person wants to work for valuable training and experience instead of money, why should it be anyone else’s business?

Non-supervisory domestic employees are represented by the American Federation of State, County, and Municipal Employees (AFSCME) Local 3548. The Federal Labor Relations Agency certified the Union on May 11, 1983. About 500 domestic employees are members. The current collective bargaining agreement became effective on April 21, 1995.”

“Non-supervisory domestic employees are represented by the American Federation of State, County, and Municipal Employees (AFSCME) Local 3548. The Federal Labor Relations Agency certified the Union on May 11, 1983. About 500 domestic employees are members. The current collective bargaining agreement became effective on April 21, 1995.”

Unions love to represent *employees* who pay union dues. Unions hate *volunteers* who don’t pay union dues, and who may dilute the market for union workers.

Unions are opposed to unpaid internships. Paying interns would seriously reduce their numbers, and require that some jobs previously done by unpaid interns would be done by paid employees who are union members.

It’s illegal for a company to force or even allow a non-exempt employee to volunteer to work off of the clock.

All of our students serve a 120-hour unpaid internship as a requirement to graduate from our programs. The written contract the college, student, and employer all sign have among many of the explicit requirements that the intern will not displace a paid employee.

Didn’t you know, Mark, that only rich college kids, whose expenses are paid by someone else, should be afforded the right to adjust the money price of their labour in order to gain valuable experience and learn valuable skills. It’s the privilege of the elite.

If you’re a black kid, a victim of ghetto schools, you need to be smothered for your own good by a self-righteous, limousine liberals yearning to feel important.

Sanctimonious statists also take issue with testing on live animals and medical testing on live humans, but risking human health and happiness in order to test their social engineering schemes is met with overwhelming approval.

They don’t have a problem with a scheme having high probability of causing unnecessary hardship or even the destruction innocent lives so long their preferred methods are used.

“If some workers get paid a little more, the efforts of profit maximization don’t stop.”

Workers should get paid what they are worth to an employer based on their ability to produce value for the employer. Period. And, most people pretty much ARE paid what they’re worth, except those poor souls who are forbidden by law for working for what they are worth.

I, of course, was never paid more than about 1/2 my actual value, but that’s a different topic, and not part of this discussion.

Why don’t you make a case for government mandating higher costs to businesses of some other input to production – energy perhaps? That way everyone involved in the energy business would benefit from the higher prices for their products, aggregate demand would increase, and this sluggish Frankenstein monster of an economy would be jolted back to life.

It’s even likely that, in many cases, higher electricity bills would cause firms to demand and use even more electricity. A virtuous cycle of production/consumption.

So, the window washer is fairly paid at $40 to wash all the windows, the business owner is fairly paid at $160 to get the contract and tell the window washer to wash the windows, and the office building values the window washing at $200.

“How do you know shifting production from leaded to unleaded gasoline, for example, wouldn’t benefit society more than the cost?”

I have no idea, and I don’t know if anyone else does either.

“So, you believe people are roughly paid what they’re worth and value can be accurately measured.”

I believe all value is subjective, but employers must be able to determine with some degree of precision the marginal value of an employee. A competitive market in labor ensures the reasonable accuracy of that value judgement.

Pay too little and you will lose employees to competitors. Pay too much and you will lose customers to competitors or go bankrupt.

“So, the window washer is fairly paid at $40 to wash all the windows…”

Yes.

“…the business owner is fairly paid at $160 to get the contract and tell the window washer to wash the windows…”

Yes.

“…and the office building owner/manager/maintenance chief values the window washing at $200.”

Only if they have previously paid that amount, had competitive bids for that amount that they were willing to accept prior to getting the bid for $160, or had knowledge of others paying that amount for the same or similar work. Otherwise they have no clue.

“To an office of highly paid engineers, the window washing may be worth $500.”

Not likely. Do you think highly paid engineers expect to pay $18-20 for a hamburger when most others pay $6 for one?

“To Warren Buffett’s office, it may be worth $100 (considering how little he pays his secretary).”

If so Warren will have to live with dirty windows, unless he hires window washers directly, and buys them cleaning tools and materials. There must be some good reason people with windows contract for cleaning rather than hiring their own employees.